Murphy: Cancel old check law

Congressman wants small businesses to earn interest on checking accounts

By Larry Rulison Business writer

Published 1:00 am, Tuesday, December 1, 2009

Photo: PAUL BUCKOWSKI

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U.S. Rep. Scott Murphy, D-Glens Falls, left, greets local business leaders before a news conference with local business leaders at the Holiday Inn in Saratoga Springs on Monday, Nov. 30. He announced new legislation that would repeal a law that prevents small businesses from earning interest on business checking accounts. (Paul Buckowski / Times Union) less

U.S. Rep. Scott Murphy, D-Glens Falls, left, greets local business leaders before a news conference with local business leaders at the Holiday Inn in Saratoga Springs on Monday, Nov. 30. He announced new ... more

Photo: PAUL BUCKOWSKI

Murphy: Cancel old check law

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SARATOGA SPRINGS — To help spur small business development in the Capital Region and across the country, U.S. Rep. Scott Murphy, D-Glens Falls, wants to repeal what he said is an outdated banking law.

The law, part of the Banking Law of 1993, prohibits businesses from being paid interest on their checking accounts.

Murphy and three others in Congress sponsored the legislation, entitled The Business Checking Fairness Act. The bill is currently before the House Committee on Financial Services.

Although Murphy introduced the legislation nearly a month ago, he unveiled details Monday for local business leaders at the Holiday Inn in Saratoga Springs,

"This is one of those outdated laws that has no business being on the books," Murphy said in a statement. "I look for common-sense solutions to problems, and this law making it illegal for small businesses to receive interest on their checking accounts simply doesn't make sense."

Murphy said the bill — which is a mere 17 lines — will increase competition between banks and "lift an unfair burden" from businesses.

Murphy said the current ban on interest-bearing checking accounts for businesses hurts small businesses in particular. That's because for a business to earn money on its checking accounts, it must choose what's known as a "sweep" account — essentially a checking account that moves money into a low-risk investment account overnight.

The problem, Murphy said, is that such sweep accounts typically have a significantly higher minimum balance than an ordinary checking account, which forces many small businesses to keep their money in a non-interest checking account.